Rethinking Intel's greatest asset

Over the course of the next five to 10 years, expect dramatic changes in the operating model of the world's biggest chip vendor.

Other numbers support the theory that Intel will be spending more in the
future to further some of the goals identified above, rather than scale
back its investments. Total R&D and marketing, general, and
administrative expenses for 2013 are projected at approximately $18.9
billion, even higher than the $18.2 billion it spent in 2012 and the $16
billion from 2011.

Paul Otellini, president and CEO, defended Intel's spending
decisions for 2013, and noted that the capex would help the company
maintain its manufacturing prowess, giving it the edge it needs to stay
ahead of the competition in the PC segment, as well as in tablets and
smartphones. The high capex will probably be maintained even in 2014 and
2015, according to Intel CFO Stacy Smith.

"The world's leading edge fabs are the single greatest asset that we have," Otellini added during the conference call.

I agree, but I've long been a fan of Intel and its "only the
paranoid survive" investment and managerial mentality. However, for many
others in Intel's public domain, maintaining a strong capex and
operating expenses budget in the face of weakening PC sales may not make
sense, especially since the company is getting clobbered by ARM in the
mobile communications equipment market.

Intel certainly has major challenges, but those who focus on its
failure to make inroads into the ARM-dominated mobile segment need to
take a closer look. If Intel successfully makes the transition I've
outlined above, neither ARM's current success, nor the weakness (today
or in the future) of the PC market will matter a great deal. The
majority of Intel's sales would be independent of each segment, and it
would have fashioned a new business model for what some of today's
embattled IDMs could become -- had they Intel's deep pockets.

As GF found out the hard way, transitioning from a few product fab to a foundry is much easier said than done. Intel is moving at a glacial pace in that direction, and herein lies the conundrum. When they move slow they learn on the go and don't get into a GF style mess. But by moving that slow they don't force themselves to confront the problems head on, and may implement a patchwork of solutions to their current systems that do not scale well. Only time will tell.

Intel will always cater to the highest performance markets. ARM is divorced from semiconductor manufacturing process. This divorce is ARM's business model. Assuming that ARM can somehow eliminate Intel's process advantage and "take over" (which is not their goal either) the processor world flies against common sense. ARM can try to stay close to the process, but there is always the "fab secret sauce" that ARM will never have access.

The problem with Intel is that they still don't seem to have SoC chips that allow people to do embedded-class complete boards, in terms of size, power and cost. You can get Raspberry Pi, BeagleBoard/Bone, etc. ARM boards that run Linux and can be powered from a USB cable. Intel needs to invest in ecosystem enough so that such boards will be available for Atom.

it is indeed interesting if Intel is not investing in the Atom ecosystem enough...does this mean they have other alternatives to Atom? Maybe their high-end server processors frozen in architecture over next 5 years automatically becomes an Atom in a semiconductor process 5 years from now (such as a 7nm process)